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The Marketplace - 1st April 2015
01/04/2015
With yesterday’s mixed data from the UK sterling managed to regain some losses versus the Dollar and Euro. Today’s economic calendar is quite busy with data from the US and we are expecting a certain degree of volatility in the market as we get closer to the end of the short week.
The market will continue to focus attention on the developments in the Eurozone as the Greek government is expected to reach an agreement with its Eurozone partners and the IMF on the latest tranche of aid.
UK
Yesterday the markets reacted to a mixed bag of data out of the UK. GBP Current accounts came in worse than forecast at £25.3 billion in the last quarter of 2014, down from the revised deficit of £27.7 billion in the previous quarter. Final GDP, Index of Services and Revised Business Investment all came out better that expected with GDP posting an increase to 0.6% compared to previous and forecast figures of 0.5%.
Sterling strengthened across the board yesterday against most major currency pairings, however strangely momentum has diminished this morning on the back of UK Manufacturing Data which came better than last month, albeit slight lower than forecast. UK factory PMI rose to an eight-month high, rising to 54.4, up from 54.0 in February. The report by Markit suggested that output in Britain's manufacturing sector grew by 0.6 percent in the first three months of 2015 compared with the previous quarter, up strongly from 0.2 percent in the last three months of last year. Growth in March remained heavily reliant on British consumer demand. This has proven buoyant as a big fall in inflation and modest wage rises have boosted households' disposable income, taking one sentiment indicator to a 12-year high.
EUR
There was a wide range of varied data out of the Eurozone’s member states yesterday. The only major figure being the CPI flash estimate which was released slightly better than expected. However, this wasn’t enough to ward off sterling, which continued to strengthen against the euro through mid-day trading and into the afternoon.
This morning a euro-area report by Markit showed that manufacturing expanded faster than initially estimated last month, boosted by growth in Spain, Italy and the region’s largest economy, Germany. Markit’s report highlighted divergences within the region with Germany posting the fasted growth in almost a year while other countries such as France, Greece and Austria experienced contraction in the sector.
USD
US data came in the form of CB consumer confidence and House Price Index. Data showed that consumer confidence increased in March to the second-highest level in approximately 8 years. Confidence was booked as consumers in America were more positive about the outlook for the labour market and incomes. The upbeat figures reinforce forecasts that spending will strengthen after bad weather hurt retailers at the start of the year. Purchases barely rose in February according to a report on Monday, which showed that the drop in February was the first decline in a year.
In another report, house prices appreciated at the fasted pace year-on-year ending January in 20 US cities. A steady supply of properties will continue to drive up home prices heading into the busy spring selling season as demand is spurred by rising rents.
Key Data
US ADP Non-Farm Employment Change: The U.S. private sector gained 212,000 jobs in February following an upwardly revised reading of 250,000 in the previous month. The release was below expectations. The manufacturing and the services sectors improved the most. However, despite the weaker job gain, the private sector’s outlook remains bright. Analysts expect a 231,000 job gain in the US private sector for March.
US ISM Manufacturing PMI: The US manufacturing sector weakened in February, dropping 0.6 points to 52.9. The reading was worse than the 53.4 points forecasted by analysts, however, the reading remained above the 50 point line, indicating continued growth. New orders fell 0.4 points to 52.5 while factory activity dropped from 56.5 in January to 53.7. Manufacturing employment also slipped from 54.1 to 51.4. Manufacturing exports continued to contract in February to 48.5, while imports softened, from 55.5 to 54. US manufacturing PMI is expected to reach 52.5 this time.
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